It's time for a quick super health check
Tags: super, superannuation, tax, end of financial year
Imagine this... when you were 21 years old, your well-meaning but financially inept uncle put $1,000 into an ordinary bank account for you with instructions to leave it there and let the bank’s interest turn it into a fortune. You followed his directions only to discover that when you reached 55 the balance of your “fortune” was just $2,080! What went wrong? Well, to put it frankly, you didn’t give it any attention.
This is a classic mistake that many Australians make when it comes to their superannuation.
How long has it been since you reviewed your superannuation to see if it’s on track to meet your retirement needs, regardless of whether your retirement date is two years away or 20?
As we approach the end of the financial year, this is the perfect time to take 20 minutes to do a quick super health check. Clients of The Super Fund Co. would have already received an email or phone call asking some these questions (and a whole lot more), but they’re relevant for everyone to think about at this time of year.
Here are some questions to ask yourself:
In the last 12 months, have your circumstances changed in any way? And in the next 12 months, do you expect them to change? For example, have you got married (or divorced), had kids, changed jobs, purchased a property, had any health issues? These factors can all have an influence on your optimal super strategy.
Do you know how your super is invested? Are you in the right portfolio based on your investor profile? (ie. conservative, growth, balanced etc). If you’re not with The Super Fund Co. and currently have your super with your employer’s default superannuation provider, have you ever made any changes to suit your own circumstances? If you’ve never made a change, you may still be invested in your employer’s default option, which may not be appropriate to your needs.
The following example explains when a default option should be reviewed...
Brian (59) and Ingrid (29) work for ABC Company. Their employer pays their superannuation contributions into the company’s preferred fund, which has a default investment option with a high allocation to cash and fixed interest assets (ie. Conservative). This suits Brian as he doesn’t like risk and plans to retire in a few years. However, it does not suit Ingrid, who is unlikely to retire for a further 35 years and accepts short-term volatility to achieve higher returns in the long term. She would be better suited to a Growth fund.
Are you making personal contributions to super? Making ‘salary sacrifice’ or non-concessional contributions to superannuation is one of the most effective ways to boost your retirement savings. You may also earn additional tax benefits or government co-contributions. On the other hand, if you are making regular contributions, are you sure that you’re staying within the set limits and won’t be penalised for contributing too much?
Who will receive your super when you die? Have you nominated a beneficiary on your account, or want to make a change to your existing beneficiaries? Some binding nominations are valid for only three years. Is yours still current?
Does your super fund provide any insurance cover? If it does, remember to check the level for which you are covered. You may find that your existing cover is now inadequate and it’s time for a review and a top-up.
Aside from your own personal circumstances shifting, the rules relating to superannuation are always changing, so it pays to review your super every year. You don’t want to reach that long-awaited retirement date to find you don’t have as much as you had “hoped”.
If you’d like to talk about any of the above, or do a obligation free super review, don’t hesitate to get in contact – we’d be happy to help.
*Assumptions for calculation: $1000 invested over 37 years averaging 2% interest with no additional contributions. Not including bank fees and charges.
